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A Tax Cut Is Funded by an Increase in the Deficit

Question 62

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A tax cut is funded by an increase in the deficit. On a graph of bond supply and demand, show and explain how this policy could lead to higher interest rates.
A tax cut is funded by an increase in the deficit. On a graph of bond supply and demand, show and explain how this policy could lead to higher interest rates.

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A tax cut shifts the demand for bonds to...

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